Chase Those Nasty Earners Away
In Oregon, lawmakers like to bleed 'em until they pack up and scurry out of state. From a WSJ op-ed:

The Labor Department reported yesterday that Oregon's unemployment rate soared to 12.4% in May, the nation's second highest after Michigan's 14.1%. What to do? If you're the geniuses in the state legislature in Salem, you naturally raise taxes.

...In Oregon, as in so many states this year, lawmakers had to choose between reducing the growth of spending and raising taxes. No contest. So government spending will climb by about $2 billion, or almost 4%, which is on top of a 21% increase in the 2007-08 biennium budget. The sliver of good news is that taxpayer groups like Americans for Prosperity of Oregon are promising to put these taxes before the voters in a referendum this year or next. Since Salem's politicians seem intent on following California's, maybe Oregon's voters will do the same and just say no.

Will voters put two minus two together? After observing voters in my own state, voting for a high-speed train from LA to SF as the state is about to declare bankruptcy, I think that may be a bit optimistic.

Of all the classes they should be teaching in high schools across America, it seems economics is one of the most necessary. Personal and public.

Comments

Hi -

I'm an economist, and your comment on the appalling lack of even the most basic economic knowledge is so much on the money that it's not even funny. I work in the non-academic world.

Part of the problem is that so many think that they're competent to make judgments on the economy and that as long as something doesn't blow up in their faces it's fine. What we are seeing increasingly is thirty or more years of bad decisions coming together to depress the economy, and all the politicians can think of is to try to preserve the broken status quo.

And it is broken: markets do self-correct, but not the way that the politicians want them to. Without subprimes there'd be no subprime crisis, yet polticians don't realize that markets are ruthless in their decision-making abilities, pretending instead that they can manipulate markets to get some socially desireable end results. Sorry, the markets have judged the subprimes to be worth...nothing.

A hard, hard rain is coming. The new legislation that purports to re-regulate the markets does nothing more than continue to pretend that markets can be fooled once again. Consumer protection? Nothing more than denial that some people deserve bad credit ratings and that risk premiums are necessary for more folks than the politicians want to admit.

Right now, you have the equivalent of small, truculent children making decisions on the economy that reflect their desire to have their own unicorn rather than what is needed: some adult supervision.

Glad you mentioned California.
These politicians are so interwoven in special interest groups they are going to tax and tax and tax.

I think Margaret Thatcher once said-Socialism is fine until you can't find anyone to pay the bills any longer.

Also Obama is deeply indebted to the ACORN special interest group. Acorn is full of corruption, and politicians fiddle while Romeburns.

David M.
at June 21, 2009 7:27 AM

Sigh, I so love my state. These are the geniuses who voted for an insane increase in beer production taxes (in a state known for its microbrews) and of course since the house/senate are Dem controlled any disagreement is solely the fault of cautious Repubs. Then you have many of the state employees and their unions complaining about cutbacks in hours/pay despite the budget issues despite them having some of the best insurance coverage of anyone in the state. Add in a Governor who wants to start charging gas taxes by the mile via GPS and talk of a sales tax (but income taxes would prolly stay the same...) and its a jolly good ol' time here in Oregon. Oh, and don't forget that the mayor of Portland is not only been banging an intern while as a city councilman, he's apparently getting at least one of his two homes foreclosed on.

And my mother wonders why I just don't want to settle down and buy a house right now... "the deals are getting so good!". Give it 1-3 years, they'll be lower, far lower.

Sio
at June 21, 2009 8:04 AM

While I agree some amount of econ should be taught in schools, I suspect quite a few econ courses would teach why a project like high speed rail is beneficial and should be funded even as a state goes bankrupt. So if you believe that project is wrong and the spending wrong, you may wish to examine a modern economics course before wishing more of it on the public.

IIRC, there are three issues in the high speed rail debate that modern economics would focus on:

a) What is the project's ROI? In the long run does it create more jobs than other uses of the money? In the short term does it create more jobs at a time when the economy needs more jobs? And what kind of jobs and how permanent are they?

b) Is it the sort of project that only a government can fund or create? Could private investors build the thing on their own?

c) California (I think) has to have a balanced budget each year, which may seem to make sense, but it's not a requirement of either the Feds or you or I or business. We're allowed to have some amount of unbalanced budgets by taking out multi-year loans on major capital projects: buying a house, building a new chip fab, investing in solar research, building a high speed train. That's especially bad in years of a depression like the one we're in, because when state taxes plunge as jobs are lost, the state with the balanced budget can't pay unemployment, or for emergency services, or for schools, or for anything at a time when services like that are needed most.

Anyway, whether you like high speed rail or not, I think that many modern econ courses teach the subject matter in a way that would seem favorable to high speed rail when answering the questions above.

I favor it for a variety of reasons, but perhaps largely because I like many of the effects of large government construction projects on the people as a whole. Which is to say I love the Golden Gate Bridge, Hoover Dam is an amazing place and well worth a several hour in depth tour, and NASA of the 60s and 70s. Projects like those were such that only government could create them, they gathered the people together to create lasting revolutions in science and technology and they spun off huge industries and huge amounts of knowledge.

My pipe dream is of a high speed rail network (probably energized with safe nukes) throughout the southwest, so that one could take a high speed train from San Diego to San Francisco, or from Los Angeles to Tucson, Phoenix, Las Vegas, and quite possibly to Santa Fe and Denver (just remember to make that left turn at Albuquerque.)

jerry
at June 21, 2009 8:41 AM

"And my mother wonders why I just don't want to settle down and buy a house right now... "the deals are getting so good!". Give it 1-3 years, they'll be lower, far lower."

You are in a bit of a bind because even if the deals are far better in one to three years, the interest rates may more than make up for it and your actual costs may well be higher. Hindsight will definitely be 20-20 on this one. However Oregon is one place I would not feel comfotable buying real estate at all with their history of retroactively depriving you of the right to build on your own land. Isabel

Isabel1130
at June 21, 2009 8:44 AM

Eh, it depends. A high interest rate doesn't necessarily mean a house is a bad deal. A lower price means a lower down payment. You can come out ahead. Buying now with a low interest rate won't mean much if the house loses say 50k+ in value in 3 years such that if I need/want to sell it within 7-10 years of buying (avg. time for owning a house) I'll be lucky to break even. That said, I'm probably looking at a cash sale and avoiding a mortgage altogether so my circumstances are a bit different than the norm.

I'm with ya on Oregon's many interesting and "fun" land use policies.

Sio
at June 21, 2009 10:06 AM

"I'm probably looking at a cash sale and avoiding a mortgage altogether so my circumstances are a bit different than the norm."

Doesn't exactly matter what the interest rates are then, does it - good for you!

My dad did that. Set a good example for me. He waited until he had enough money to buy a house and only then bought one. I don't buy what I can't afford. I have pared back everything thanks to the downturn in newspapers, but I miss buying clothes. I wanted to get a little short wool black jacket, so I sold two pair of earrings I wasn't wearing on eBay for about $17 "profit" each ($34 total) after shipping and listing costs. I found a jacket for $15 plus $8 shipping, asked the seller if she'd take $10 plus the $8 in shipping -- she said yes. So, I got the jacket and I still have surplus left over from my earring sales, which went in the bank. (And I think the earrings cost me about $8 each, in Paris, when the dollar was strong.)

P.S. And the jacket is Italian designer, nice condition, so I really made out. And felt fiscally responsible while doing it.

In the long, run, I think that high-speed rail between SF and San Diego makes sense. Funding it now seems dumb though when we've got about a shortfall of about 24 billion dollars.

California is perpetually screwed financially because of its initiative process - people vote in feel-good measures that must be funded, so matter what. Quite frankly, your average citizen is not competent to make these choices (yes, I know, I'm an elitist). No large-scale organization can be run without providing budgetary flexibility. It is also screwed because of the supermajority requirement to pass a budget and the fact that next to none of its legislative districts are competitive. So legislators from both parties have no incentive to compromise. Our state is ungovernable. Here's my modest proposal for a new initiative:

Legislators must pass a balanced budget each year by the deadline or forfeit their annual salaries.

Cheezburg
at June 21, 2009 4:06 PM

And a second initiative: In a year when state revenues decline from the previous year, funding for all programs mandated by any voter initiative are reduced by the percentage that state revenues decline.